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A 24-page self evaluation study from the Council of Mortgage Lenders, Where do we go from here? How UK mortgage lenders see the UK mortgage market - past, present, and future, surveyed members thoughts on the sector’s past, present and future.

Assessing the environment pre-2008, the report said: “With hindsight, some lenders think they allowed brokers to have too much influence on product design. Given the obvious incentive for someone who gets paid a one-off fee for selling a product to ensure they have repeat sales opportunities as often as possible, a number of lenders are suspicious about whether the high prevalence of two-year product sales invariably matched consumer needs.”

Lenders claimed the competitive nature of the mortgage market before the financial crash meant there was too much focus on business relationships. It said: “Many lenders felt that the industry had in the past effectively been designing some mortgage products primarily for distributors as though they were the client, rather than unequivocally for borrowers as the real client.”

One respondent said: “Intermediaries, and particularly packagers, fanned the flames, but lenders made the playing field and set the rules of the game. Lenders relied too much on FSA authorisation of intermediaries.”

The report identified complexity, risk and the illusion of permanent house price inflation as key negatives in the market pre-2008, but said there were benefits in choice of products, pricing and access.

Many lenders felt that the current market has become too conservative and risk-averse due to regulatory over-reaction to the lessons of the financial crisis and lenders’ own collective re-focusing on de-risking.

Respondents claimed borrowers whose income is unpredictable and first time buyers will be most disadvantaged by regulatory changes.

It said: “First-time buyers are seen as a special case. Lenders in many cases feel they are on the horns of a dilemma: while increasingly differentiated, risk-based pricing is entirely the right thing to do both in business terms and for the stability of the financial system and is firmly entrenched through regulatory capital requirements, consumers can see it as having a perverse outcome in that those who can least afford it are charged the highest price and are thus kept out of the market. But the alternative.”

Lenders said they now feel inhibited from serving first time buyers and “non-standard” borrowers from a combination of regulatory factors and market factors.

Discussing how to improve the market, lenders aid the regulator must make the intent of its rules clear while the government should decide whether or not it continues to have an aspiration towards increasing home-ownership, or whether it sees its role as managing a transition to lower levels of home-ownership, and craft its housing policy accordingly.